Do You Know the Real Cost of Your Package?
Packaging buyers need to think about the ultimate cost of their packages—not just the price of the unfilled containers.
Packaging buyers are sometimes accused of trying to get the cheapest possible package without considering how it affects total manufacturing costs. Although sometimes true, most packaging buyers do take into consideration quality, value, and total cost. In today's packaging industry, purchased materials are often a high percentage of the total cost of goods. Indeed, the price for materials and services can have a major impact on the company's bottom line.
The Tube Council of North America believes that tubes are one of the best buys in packaging. To find out why more pharmaceutical packaging buyers weren't using tubes, we surveyed a group of purchasing agents and packaging professionals.
Aside from the fact that most buyers do not have a say in the type of package that is going to be sourced, many people we polled felt that tubes just cost too much. But others—especially those at some of the biggest, most savvy, and most technologically advanced companies—know that sometimes tubes can be more economical even though they may cost more per unit than an alternative package.
A common question is: "Why would I put my product in a tube that costs $80 per thousand when I can use a plastic jar that only costs $41 per thousand?" Should we assume that companies that use tubes aren't concerned with price? Absolutely not.
We contacted a senior purchasing agent in a company that uses tubes for some of its products. He agreed that price is an important factor, but he explained that it is only one part of the picture.
The discussion then turned into a lecture describing something the purchasing agent calls "ultimate cost," of which price of the unfilled container is only one element. The cost of the label, the closure, transportation, receiving, handling, and storage, as well as the output rate of filling operations, all affect the ultimate cost of the package. Other factors such as quality problems, equipment downtime, or label obsolescence should also be considered, although these costs may be difficult to assess.
The purchasing agent went on to explain how things work in his company. Whenever a new product is going to be introduced, a packaging development team is formed to ensure interdepartmental integrity throughout the project. People from sales, marketing, packaging R&D, packaging engineering, purchasing, logistics, manufacturing, quality assurance, and sometimes even subcontractors meet several times during the development, implementation, and execution process. Selecting the most efficient, appealing, cost-effective package is their ultimate goal. They may not always choose a tube for their new products, but suppliers can be sure that it is not the price of the unfilled container alone that determined which package they would use.
The Tube Council of North America has conducted studies on the economic competitiveness of tubes versus other containers. What we found may surprise many packaging professionals who think they are saving money based on the type of packaging they use.
You do not have to be one of those buyers who is accused of choosing a package based only on the price of the container. Round up your packaging team and suppliers, complete an ultimate cost analysis with tubes as the package of choice, and show your directors what "value added" really means.
Steve Remington is a member of the Tube Council of North America. For more information, contact the council at 212/431-8555 or via E-mail at firstname.lastname@example.org.